Adapting to change

Tue, 2007-11-20 18:06

"Keep on rolling; Keep on rolling; Roll with the changes." -- REO Speedwagon

On my recent vacation in Ireland, we stopped in to play golf at the New Forest golf club in Westmeath, a little south of Mullingar in the Midlands. In talking with the starter, I discovered New Forest, a public course (something of a rarity these days in any country), encountered something of a problem during construction: an ancient stone-walled orchard, located smack dab in the middle of the whole works. Historical preservation ensured that the builders couldn't touch the 10-foot walls -- even though the orchard's trees were long dead and overgrown with vines.

What to do? Well, the course's designers turned the space INSIDE the walls into the ninth hole. Rather than fit the topography to their plan, they adjusted their plan to fit the topography -- creating a one-of-a-kind golfing experience in the process. That's what adapting to change is all about.

Something similar is going on in trucking, too (minus the tee boxes, fairways, bunkers, and greens, of course) as fleets large and small are adjusting themselves to new realities in the freight market. These adjustments aren't exactly new, either: the late J.B. Hunt started making them back in the late 1980s when he began his famous experiment with intermodalism -- an experiment only now starting to benefit the company that bears his name. He could clearly see the profit potential that others didn't in working with the railroads to provide joint freight service -- buying rail capacity at wholesale prices, then sell it bundled with his truck capacity at retail prices, keeping his costs low as his trucks didn't have to run a lot of miles or burn a lot of fuel.

Now, Hunt's first stab at intermodalism wasn't a rousing success -- not in the least that railroads were considered anathema to truckers back then, as both were such die-hard competitors -- so he pulled back and waited. In fact, he'd pretty much retired by the time intermodalism finally came into its own for his fleet -- along with dedicated contract carriage services -- and none too soon.

The recent falloff in tonnage and rates in the truckload sector would have hurt the J.B. Hunt of old, but since it's worked to adapt to the changes in the freight business -- by diversifying its services and changing its freight mix -- the carrier stayed on an even keel. Though net income fell in the third quarter to a hair over $50 million, J.B. Hunt remained profitable -- bagging $892 million in revenue, 4% more than the same period last year, which was a boom time for freight.

"Our intermodal business clearly represents the foundation of our earnings resiliency and demonstrates that our company is no longer driven by the cyclicality typical of a truckload model,” said Kirk Thompson, J. B. Hunt's president and CEO. The carrier added in its third quarter earnings report that its intermodal load count increased 23% over the same quarter 2006 with significant growth coming in shorter haul lanes primarily in the Eastern half of the U.S. as customers continue to convert over-the-road truck freight to the more economical intermodal service.

That's what rolling with the punches and adpating to change in the trucking business is all about -- and it's something we're only going to see more of in the future, I predict.